Regulator Warns Against Haste As Pension Transfers Surge

By Martin Croucher
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Law360, London (November 19, 2020, 11:08 AM GMT) -- The Pensions Regulator has said it fears that the financial impact of COVID-19 is pushing consumers into making "hasty" decisions about their long-term savings, after insurers reported a rise in the number of retirement transfers since the first national lockdown.

The tough economic circumstances could be leaving people vulnerable to fraudsters, the watchdog said on Wednesday. It was responding to figures released by the Association of British Insurers, which said the number of people taking money from their retirement pots increased by 56% between April and September.

"We are concerned that the impact of COVID-19 on personal finances may result in savers making a hasty decision about their pension pots, which could be damaging to their long-term interests and leave them vulnerable to scammers," Nicola Parish, executive director of frontline regulation at TPR, said.

The ABI has followed pension transfer rates since the start of the pandemic. But fears that the financial crisis could prompt a raid on savings have not materialized: the trade body said in July that transfers between plans were down 40% in April on the same period last year.

The Personal Finance Society, the professional body for financial advisers, warned its members in September that there would probably be a surge of people seeking pension transfer advice toward the end of the year, after the government's job support scheme ended and the U.K. was expected to be hit by a wave of redundancies.

But the effect has again been less drastic than expected as the government extended its furlough scheme into March 2021. The ABI said that transfer numbers were still down on last year. 

Phil Brown, director of policy at retirement savings company The People's Pension, said his research shows that just 2% of respondents to a survey withdrew money from their pension pots between the end of March and mid-October.

"Despite the many challenges of 2020, the vast majority of U.K. savers remain committed to saving for retirement," Brown said.

--Editing by Ed Harris.

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